Do Not Believe the Myths About Bankruptcy

As the U.S economy struggles to recover from the recession that began in 2008, many find themselves dealing with issues such as job loss, plummeting housing values and rising costs of necessities. More and more, people are finding that they cannot make ends meet and are sinking further into debt. Some might consider filing for bankruptcy as a way to regain financial footing but are afraid to do so because they believe some common misconceptions about bankruptcy.

Financial irresponsibility is the not only reason for bankruptcy

There is a lingering stigma surrounding bankruptcy because many believe that only people who spend wildly and live beyond their means need to file bankruptcy. While it is true that some people who file bankruptcy need to do so because they were careless with their money, it is far more the case that people enter into financial difficulties because of extended unemployment, divorce or unexpected medical bills.

While the economy is slowly rebounding in 2013 from the 2008 market collapse, many people are still without jobs after months or years of unemployment. The Bureau of Labor Statistics reported in April 2012 more than 5.3 million people in the U.S had been unemployed for six months or more. Job loss also leads to loss of health insurance. A study conducted by the Centers for Disease Control and prevention in 2011 revealed that 20 percent of people in the U.S. had trouble paying medical bills in the previous year. These difficult economic realities can make people end up in difficult financial circumstances through no fault of their own.

Bankruptcy does not make people lose everything

A myth that prevents many from filing for bankruptcy protection is the belief that they will lose everything they have in the process. In reality, however, bankruptcy allows people to make exemptions from the things that are included in the “bankruptcy estate,” or property available to pay back creditors. Some of the exemptions are for housing, a vehicle worth up to a certain amount, clothing, household items and retirement savings accounts. In many cases, people who are filing bankruptcy do not have anything left over for the trustee to liquidate to pay back creditors after they take all of their exemptions.

Bankruptcy ruins credit forever

Some fear that if they file bankruptcy they will never be able to get credit again and that it will ruin their finances forever. Just the opposite seems to occur, however – after people emerge from bankruptcy, they tend to be inundated with a credit card and other lending offers. People need to be aware that the lenders offering these lines of credit can be predatory and often charge exorbitant interest.

People generally will have to pay higher interest rates on credit they obtain after bankruptcy, but if they make payments in a consistent and timely manner eventually interest rates will go down once they have proven financial stability to lenders.

If you are struggling financially and feel like you have no options, speak with an experienced debt relief attorney who can advise you whether bankruptcy is right for you.